Asian Economy Boosts Demand

The pent-up demand for industrial equipment and the development of infrastructure in this Region resulted in a large and sustained order intake volume.

In the domestic European market, signs of economic recovery were discernible only in a few industrial sectors and in a broader context in the new EU member states of Eastern Europe. Otherwise, demand was dominated by replacement investments. The competitive situation for Europe’s manufacturers continued to be hampered by imports from the dollar zone.

Group figures as per 31 December 2004

KSB Group		01-12/2004*	01-12/2003	Change
Order intake	€ million	1 295.8	1 193.2	+8.6 %
Sales revenue	€ million	1 268.3	1 178.1	+7.7%
Employees	(31 Dec.)	12 476	12 281	+1.6 %

*provisional figures

Growth in order intake and sales

Order intake in the KSB Group was up 8.6 percent on the previous year. This growth rate is partly attributable to the first-time consolidation of two new companies, one in The Netherlands (May 2003) and the other in Spain (Jan 2004).

KSB achieved growth in all Regions, with double-digit rates being posted in the Region Asia / Pacific in particular. The Chinese joint venture KSB Shanghai increased its order intake by more than 60 percent as a result of extensive orders from the power engineering sector.

Despite the difficult competitive situation, almost all KSB companies in Europe managed to increase their order intake, including KSB AG with a 3.4 percent growth. In the Region Americas, the Brazilian KSB company reported dynamic growth on the back of orders from industry, as well as the energy and oil sectors.

Sales revenue in the KSB Group, which showed an increase of 7.7 percent, lagged slightly behind order intake owing to a number of longer-term projects. This applies in particular to KSB AG, whose sales were 1.1 percent up on the previous year. The development of sales revenue, too, was dominated by growth rates in Asia, above all that of the Chinese KSB joint venture.

Earnings

Because of provisions in the eight-figure euro range for the KSB Structural Programme, the Group's earnings before tax are substantially down on the previous year (€ 29.8 million).

Structural Programme is implemented

Aiming to ensure a sustainable improvement in profitability and competitiveness, KSB started a Structural Programme that primarily focuses on the European companies. In the first sub-programme, devoted to “Efficiency Enhancement”, savings of more than 100 million euros will be achieved by the end of 2006. These measures, the first of which were already implemented in 2004, include projects targeted at cutting material costs, pruning the product range and reducing fixed costs in all organizational areas.

In a second step, KSB is implementing a Site Concept linked with a new production organization. To this end, the company set up a pilot project in 2004 to test a production system organized into synchronized processes which helps minimize the use of temporary storage facilities.

Growth and innovation programme

At the same time, KSB continued its “700 Up” growth project, which is aimed at fostering new business ideas and inno-vations. In 2004, this project led to the addition of some new and innovative products and services to the range already on offer, including a module for energy-saving desalination of seawater.

Changes in number of employees

At the end of 2004, the Group had 12,476 employees; this is 195 more than a year earlier. The increase is largely attribut-able to the acquisition of the Spanish company Bombas ITUR. In KSB AG, the number of employees fell by 37.

Outlook

A further increase in order intake and sales revenue can be expected in the current year. Apart from the activities of the Group in regions outside Europe, the operations for our customers within Europe will also contribute to this increase, for example with infrastructure measures in Southern and Eastern Europe, as well as in the industrial business.

To make the most of market opportunities in Russia, KSB is planning a substantial increase in its presence there in marketing and service operations. At the same time, a further expansion of activities in China is envisaged. This also includes a new valves company that was established at the end of 2004 in Dalian (Northern China).

Thanks to the efficacy of the structural measures taken, the KSB Group is aiming to achieve a profit in 2005 above that of the two previous years. KSB is continuing its Efficiency Enhancement Programme and Site Concept measures in the current year.